tv Nightly Business Report PBS December 14, 2012 1:00am-1:30am PST
>> tom: there's no deal, but the two sides are still talking. house speaker john boehner and president obama met earlier this evening at the white house in an effort to move forward the stalled fiscal cliff talks. there are now just 18 days before the tax hikes and spending cuts that make up the cliff take effect, and today, there were few signs of progress. as darren gersh reports, the tone of the talks, if anything, is getting worse. >> reporter: house democratic leader nancy pelosi may just have a second career as a stock analyst. her commentary on the markets today was dead on. >> so far, they trust that we would not be so stupid as to go over a cliff. >> reporter: but pelosi made clear what everyone knows-- time is running out to reach a deal by christmas >> we really have to come to some agreement in the next couple of days or the very beginning of next week for us to have engineered our way to a solution. >> reporter: the fiscal cliff is really a negotiation between two men, and one of them today was not sounding very happy. house speaker john boehner brought out the charts to make his case.
>> here we are at the eleventh hour, and the president still isn't serious about dealing with this issue right here. it's this issue-- spending. >> reporter: the president left his spokesman to respond that republicans were pushing a plan of fantasy economics that raised more revenues while also cutting taxes on the wealthy. >> what spending cuts have the republicans put forward? the proposal that we've seen is a two-page letter, and the much- discussed second proposal is less than half a page. there is no specificity behind what the republicans have put forward. >> reporter: right now, the risk is rising that we will avoid the fiscal cliff, but end up with what some call a worst case outcome. >> we get some sort of hoaky deal that's put together with gimmicks and baseline adjustments and all that stuff. they get by the fiscal cliff without much damage. wall street breathes a sigh of relief, but we've done nothing
for the longer term debt-to-gdp ratio. worst of all, most of what they do will take effect immediately, which we don't need. >> reporter: tomorrow, speaker boehner is set to return home to ohio for the weekend. an aide says he'll be available for talks, adding ohio has both cell phone service and airports. darren gersh, nbr, washington >> susie: that stalemate over the fiscal cliff weighed on the markets today, despite some encouraging reports on the economy. investors shrugged off news that initial jobless claims fell more than expected during the latest week, retail sales bounced back in november, and wholesale prices declined last month. by the close, the dow tumbled 75 points, the nasdaq fell 22 and the s&p was off nine points. despite that pessimism, many investment managers and analysts are feeling optimistic about 2013. a new investor survey says the u.s. stock market will be the best performing stock market in the world. for details, john rogers joins us. he's c.e.o. of the cfa institute
that conducted the survey. so john, the u.s. stock market ranked as the best performer. if we look at the charge of coming in in second place, china and brazil. why the vote of confidence considering all these concerns about the fiscal cliff? >> you're right, susie. it's interesting. it's a happy holiday season for investors. in the u.s. the stock market is going to have returned close to 13, 14%. and charter financial analysts around the world that we surveyed as you say feel pretty good about the prospects for next year. markets often do climb a wall of worry but in perspective we've had resolution of political uncertainty here in the united states. the new political leadership in china appears to be market friendly. we have avoided having southern europe slip into the mediterranean. and so also given other asset classes equities appear to be relatively
attractive. >> let's talk about that, actually. because did you ask the people that you survey what are the best asset classes. and stocks got-- was at the top of the list. let's look at the list here, followed by precious metals, commodities, bonds and cash at the bottom of the list. tell us a little bit pore about those rankings from investment managers? >> sure. and these are charter financial analysts that we survey, our members. they spend their time in the markets investing. and compared to last year, there is more pessimism about the prospect it's for bonds, for fixed income given the very low nominal level of yields. and also for cash where basically you can't get any return. so equities were the clear favorite with over 50% of our respondents saying that they would be the best asset class. >> there is still some pessimism about europe, primarily coming from respondents, our members there. but there's more open coming
from-- optimistic from charter financial analysts who are reporting out of asia pa sick markets, feeling better about the prospects for the global economy. which after all do drive equity prices. >> susie: now that you bring up the economy, let's look at exactly what the results are, when ask you what the outlook for the global economic growth would be, 40% felt that the global economy would expand, 20% felt that there might be contraction. and europe continues to struggle in 2013. can you tell us a little bit more, give us more color on those results? >> sure. there is more ownership about-- optimism than economic growth than last year. but there are concerns. the european debt crisis is the largest one and also very interestingly despite the fact that stock market levels have recovered broadly speaking to prefinancial crisis levels, our members are very concerned about the crisis of confidence driven by ethical issues in the finance industry itself.
and that is something that we pay great deal of attention to. is restoring confidence through better ethics in the profession. >> all right. we're sgoing have to leave it there. very interesting survey and the results. thank you so much. john rogers, c.e.o. of the cfa institute. >> tom: in the world of financial markets, what's bad for the economy can be good for bonds and vice versa that held true again today. the positive news on the job market caused bond prices to slip. the ten-year benchmark treasury lost ground, and the yield climbed to 1.73%. it's highest in six weeks. the yield moves in the opposite direction of price. suzanne pratt reports, the outlook for bonds next year depends a lot on what happens washington this year. >> reporter: less than 2%-- that's what the benchmark ten- year treasury bond pays today. even with record low yields, investors have continued to buy bonds in a big way. everyone from the chinese
government to american retirees hold u.s. treasuries. and the federal reserve continues to promise rates will remain low, at least for the next few years. so what does that mean for bond investors, especially as worries about a bond bubble grow? >> i know those people have been warning about a bond bubble for quite a few years. but the fact is, we just haven't seen it. the fed has made quite clear that if inflation expectations were to get out of control, or even if we got even close to it, the fed would do something about it. >> reporter: don't forget, inflation is the bond market's nemesis because it erodes the value of bonds. and there's concern all the money the u.s. central bank pumped into the financial system in recent years will drive up prices. and then there are those who believe the u.s. economy will improve in the coming months. >> so we're not so optimistic near-term on the treasury
market, because we think that economic data is going to get a little better, and that the fiscal cliff resolution, which we do expect before yearend, will give a little boost to risk assets and help treasuries to sell off. >> reporter: still, many bond market pros believe the positives outweigh the negatives for treasuries. those include super low inflation, modest economic growth, and more fed buying of bonds next year. and there's one more-- the fiscal cliff and whether we go over it. >> let's just say it was temporary or permanent. that's going to shave a few points off of gdp growth next year, and that's also going to reduce bond supply next year. so, both of those factors mean that interest rates should be driven lower. >> reporter: just how low on the ten-year bond? some experts predict the yield will dip to 1.5% if we go over the fiscal cliff. if we avoid it, look for the yield to climb as high as 2.5% by the end of next year. suzanne pratt, nbr, new york. >> tom: still ahead, could
legalized recreational marijuana use become the new competitor for medical dope? we speak with the c.e.o. of marijuana products maker dixie elixirs. >> susie: american consumers did a bit of shopping in november after laying low the month before. retail sales rose three tenths of 1% last month, following a decline of the same amount in october. the pickup in november spending is a hopeful sign for an economy that many fear is slowing down. but retail experts say the trend can hardly be considered strong. >> it's muddling along. expectations were for 0.5% increase; it came in at 0.3% and that's off of a weak october. remember, october was quite weak. so, these are not robust numbers, they're not terrible numbers. it's a continuation of a sluggish consumer, that is still sluggish as the year wore on. >> susie: november sales were twice as strong if we don't include a big decline in spending at the pump. gas station sales posted their
biggest drop in four years. instead of filling up, consumers bought cars, clothing, booze, and a lot of home furnishings. the question now is whether shopping will stay sluggish as the countdown to santa draws near. and there are fresh worries consumers may be cautious because of possible tax increases coming in the new year. >> tom: best buy's founder and biggest shareholder, richard schulze, is expected to make a buyout offer for as much as $6 billion by tomorrow, according to minnesota's "star tribune" newspaper. that's optimistic news for investors. it sent the stock to its highest point in about a month to a little over $14 a share.
>> tom: many small u.s. businesses are bracing themselves for a potential double whammy in the months ahead-- higher income taxes and new health insurance costs. at the beginning of 2014, companies with more than 50 full-time employees must provide health insurance or pay a penalty. while some details of the affordable care act are still being worked out, many small firms fear the changes could force them to cut employees or drive them out of business. diane eastabrook has more. >> reporter: the holidays mean big business for tasty catering. >> we're at metawa at 8:30. we're at schaumburg at 9:00. >> reporter: during this time of year, the catering company works around the clock, preparing food for office christmas parties in the chicago area. co-owner thomas walter brings in over 100 part-time employees to help out his 70 full timers during busy times like this.
>> without the part-time employees, we have no product. they're a vital ingredient. >> reporter: under the affordable care act, businesses with 51 or more full-time employees must provide health insurance or pay a $2,000 penalty per employee. an employee who works 30 or more hours a week is considered full time. walter does offers health insurance to his full-time staff, but not to the part- timers, many of whom often work over 30 hours a week. >> of course, we will do the right thing, both legally, ethically, and morally, but it could be the ruination of our business because we don't have a healthy profit margin. our profit margin vacillates between 3% and 5%. >> it's really the practical implementation of the law that's generating the questions. >> reporter: marcus newman is an insurance broker for g.c.g. financial. he says the affordable care act may not be as detrimental to small businesses as some fear. in the case of part-time workers, he thinks the law will apply to the average number of
hours worked over several months or even a year. >> so when you have an employer that worries about a week here or there where there's extra work, and people that are part- time may go over the threshold, this is not a problematic situation at this point. >> reporter: newman also thinks lower-paid workers at smaller firms may opt to buy insurance from government-subsidized exchanges. those premiums could be less expensive then what the employees are currently paying through company-sponsored plans. in the long run, that could end up saving money for firms like tasty catering. diane eastabrook, nbr, elk grove village, illinois. >> susie: every day, about 10,000 baby boomers retire. but how ready are they to leave the workforce? ruben ramirez takes a look. >> reporter: joyce and g.h. are baby boomers. joyce left her job in ad sales about five years ago. g.h. is an artist. they live comfortably and feel they've got a good financial plan. getting off on the right foot with finances usually starts early. >> my parents were both
depression-era people so, yes, they talked about saving. they talked about not spending more than you can pay. all my life, they would say, "have you been participating in your savings plans?" >> reporter: a new survey from t.d. ameritrade found 74% of people who felt they were prepared for retirement had automatic deposits into their 401(k) plans. the traditional advice of starting early and maxing out contributions remains true today. >> yes, you need to learn about investing; yes, you need to know about what's prudent investing for you. but ultimately, it's about putting aside money from your income, figuring out a way to budget that is within your means. >> reporter: having the discipline to save money can be challenge, but joyce and g.h. found a system that worked. >> an artist's life is a roller coaster, but what happens with that is that you tend to try to be as frugal as possible at all times.
>> i don't spend any more money when i'm feeling flush than what i do normally. >> reporter: not all boomers are in the same boat as joyce and g.h. in the same t.d. ameritrade survey, the three key reasons some felt unprepared for retirement were job losses, a poor economy, and above average healthcare expenses. >> there is a little bit of a realization that "i should have planned better," even with the ones that were not prepared. >> reporter: while baby boomers are mostly optimistic, retirement is still a moving target. about four in ten boomers say they expect to delay leaving the workforce or work during retirement. ruben ramirez, nbr, new york. >> susie: how much do you expect to spend in retirement? for tips on calculating how to set aside and what to do with your money if you're already retired, visit us at nbr.com. just look for the "nbr-u" tab.
>> tom: swiss bank u.b.s. could be the next bank to pay a fine over allegations of rigging the libor rate. that's the interest rate used to set borrowing costs for everything from mortgages to credit cards. u.b.s. faces a $1 billion penalty for its role in the manipulation scandal. in june, u.k. regulators slapped britain's barclays bank with a $450 million fine for similar charges. >> susie: u.s. regulators may be near an end to an anti-trust investigation of google's internet search results. at issue is whether google manipulates results of its internet search engine to hurt competitors. it was accused of unfairly
promoting its shopping and travel services over those of others. google denies it used its dominance in the search business to hurt rivals. the federal trade commission is expected to wrap up the probe by the end of the year. and why a new program to help student loan borrowers could on another front google allowed its google maps app to be used on apple iphones, ths has been a real controversial issue, as you know. and now apple iphone users will have access to that and it's not just about getting directions. a lot of revenues are involved here, advertising revenues, huge, enormous. >> big news. >> tom: it was. three months in the making, of course, when apple unleashed its new iphone it didn't come with that goog el-- google map app, now is out there on the market. apple shares were weaker here today. overall the broader market in our market focus was a bit weaker. stock prices were weak despite the encouraging data on fewer new unemployment claims over- shadowing the lack of progress on fiscal cliff talks.
the s&p 500 tried to make some gains early in the session but just couldn't hold on. as more discouraging rhetoric came out of washington, the index fell until the 3:00 hour eastern time. it finished lower by six tenths of a percent. this breaks a six-session winning streak. volume was steady from yesterday-- 662 million shares on the big board; just over 1.8 billion on the nasdaq. all ten major stock sectors were lower, led by the nine-tenths of a percent fall in both the health care and energy sectors. drug maker merck led the drop. shares fell 2% with volume a little heavier than usual. merck was the biggest percentage loser among dow industrial stocks. shares have seen nice gains since the spring time. it is up 16% this year. pharmacy retailer cvs had two pieces of good news for shareholders-- a 38% increase in its quarterly dividend, and its outlook for next year's profit growth was better than anticipated. that sent shares higher by 2%, closing at a 52 week high. it was a different outlook from insurer company metlife.
the firm blames ultra-low interest rates for predicting earnings will decline next year. shares declined on that prediction, down 2.3%. volume more than doubled. in addition to the soft outlook, metlife said it wasn't anticipating any stock buybacks next year. energy drilling contractor nabors industries powered the losses in the energy sector. shares fell 4.7% after investment firm jefferies downgraded its rating to under- perform and cut its price target. the analyst's concerns include a lower outlook for the work nabors does with hydraulic fracking. after many months of talking, sprint has offered to buy the rest of wireless technology firm clearwire it doesn't already own. sprint has offered $2.90 per share for the remaining 49% stake in clearwire. but the offer faces a lot of resistance from other large shareholders. the market clearly thinks a higher offer could be coming. clearwire shares jumped 14.9%. volume jumped ten-fold with the
stock closing well above sprint's buyout offer. sprint saw heavier volume but very little price movement, falling just two cents per share. smart phone maker research in motion continues its recent rally, up another 4.1% today. this brings the stock back to prices last seen in may, and up 120% from their september low. the company's newest blackberry device is due late next month. and today, the u.s. immigration and customs enforcement agency has signed on to a pilot testing program for the device. maybe it's customers stocking up on their holiday ales. boston beer raised its profit look for the year late yesterday, leading to a rally today. boston beer's best known brew is sam adams. shares jumped 15.5%, shooting up to an all-time high. credit for the better forecast goes to the timing of certain expenses. all the five most actively traded exchange traded products were down. the nasdaq 100 tracking fund had the biggest drop, down eight tenths of a percent. and that's tonight's "market focus."
>> susie: fiscal cliff negotiations going into the 11th hour, how will that affect the outlook for next year. we'll ask b.m.o asset management's sandy lincoln. he's this week's "market monitor" guest. and why a new program to help student loan borrowers could mean a big win for high earners with graduate degrees. >> its medical marijuana business is a $2 billion a year industry already. it's projected to more than quad are you nell the next four years. but now colorado and washington state residents can use marijuana without a doctor's permission. while they are still breaking federal law, what impact could these new state
laws have on the medical dope business? we have more of our recent conversation with tripp keber, c.e.o. of medical marijuana products maker dixie elixirs. >> you are looking at a $300 million in denver going to in excess of $600 million, this is about taxes, this is about jobs. the state of colorado we paid into a state coffers as an industry over $50 million in taxes, licenses and fees. we employ as an industry directly over 10,000 people in the state. and so there are not many states that can afford to turn a blind eye to that. so i certainly believe in the state of new jersey and potentially even connecticut certainly with the experiences of the superstorm sandy that they going to look long and hard at these markets, at these vertical markets to potentially den bit. >> tom: does legallization of the drug itself, however, hurt your elixir business. in other words, f people can consume marijuana directly through smoking it, that there is less of a demand, perhaps, for the elixir, the soda products and other
ointments that you sell? >> i see the infused products manufacturing business representing between 30 and 33% of the overall addressable market. but each and every day people are being introduced to these products. at the end of the day people know that smoking is not good for you. medical physicians are typically not prescribing a patient to smoke raw plant material so given the choice of a 12 ounce medicai medicaid-- medicated elixir or sub lingual glycerin based tonic or tincture you could place under your torning i think many people who are educated and understand the benefits of the plant will probably start to navigate towards those product lines. >> tom: tripp, have you had any interest in dixie elixirs from more traditional consumer companies. >> i have, alcohol alcohol, tobacco and big pharma. we have certainly heard from several of those industries. and potentially expressing an interest. this is a market that is growing from $2 billion today to in excess of $9 billion likely in the next
four years. you're talking about hockey stick growth, tom. and i think it would be fool toirb think that these industries are not look very closely at companies like ours. >> tom: are they looking for all 50 states to move in the direction that colorado has or waiting to hear what kind of, what kind of stance the drug enforcement agency or for that matter congress is going to take on the kinds of ames that have legalized the use of marijuana like colorado voters approved? >> at the end of the day we're interested as an industry to understand what the justice department will deliver in its message. i know our governor has reached out and had one or two conversations. but those conversations have not been reported publicly as to what will be entailed. >> tom: we have to leave it there. i know a lot of people would like to talk about the morality of this but certainly an interesting business development in cole come tripp keber, owner of dixie elixirs. >> susie: that's "nightly business report" for thursday, december 13. have a great evening everyone, and you, too, tom.
>> tom: good night, susie. we'll see you online at nbr.com, and back here tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> join us anytime at nbr.com. there, you'll find full episodes of the program, complete show transcripts and all the market stats. also, follow us on our facebook page at bizrpt. and on twitter @bizrpt.